I don't believe the productivity figures--do you?

Great Debates
21

[QUOTE=iamme99]
But if you had LESS people working more hours to produce the same amount, it would still appear that productivity was rising.

[QUOTE]
I’m not sure I follow this. If you measure productivity as production per hour, then fewer people working more hours would not necessarily mean more productivity.

10 workers work 40 hours = 400 hours-worked. If they produce $4000 worth of goods, then you have $10 per hour.

5 workers work 80 hours = 400 hours-worked. If they also produce $4000 worth of goods, then you still have $10 per hour.

It seems unlikely that the second scenario is likely. Working 80 hours a week regularly will not double anyone’s productivity. Also, if you measure costs, it seems that the people working 80 hours will make more than 2 shifts each working 40 hours. Depending on what sort of overtime and benifits they have to have, of course.

Am I being overly simplistic?

22

I think so. There have been many, many stories of companies that have laid off staff and not hired replacements, forcing the remaining people (often out of fear of losing THEIR job) to work 50, 60 or 70 hours per week. Assuming the average person in this “lean & mean” age wasn’t slacking off, how can you have more productivity with less people working? Barring immediate and radical operations and technological changes, I don’t believe that this is generally possible. I think the government measures productivity on a per person basis. Can anyone find a link that describes how the government computes productivity gains?

23

Correct, I should think. I’m no expert on how the stats are computed, but it’s clear that there is no way of computing the hours worked of salaried employees, who might not even know themselves.

24

If you have more parts and components of your product outsourced from foreign countries, and if you dont accurately report the actual percentage of foreign contribution(in real terms adjusted for differences in wages between american workers with benefits and chinese communists who cost 29 cents an hour ) then the “reported” productivity numbers will “appear” to be increasing.

For example, if your american workers make cars, and the steel and engine previously consisted of 20%, and you now buy your engines and steel from asia so that the steel and engine “cost” components are only 10% of what it now takes to make a car, then your “reported” productivity numbers will appear to increase, even though the american workers are producing exactly the same output as before.

Moving jobs overseas will nearly always make the “reported” productivity numbers appear to increase.

If half of the car(s) is now made overseas, but that foreign portion now only costs 10% of the total production costs, then even if outsourcing is honestly reported, it will seem that more of the total cost of the car is being produced per labor cost/american worker. YOu can double your manufactured output with only a 10% increase in the labor component of all your cars.

Since companies do not separate the reporting of actual physical output per worker by country, the benefits of lower costs from overseas outsourcing inflate the numbers of remaining american workers.

25

I am very nearly certain that the value of “intermediate goods” (car engines, for example, or anything else which is only a single part of a final consumer product) that are imported into the country, even if they are imported by a corporation from one of their own subsidiaries in a foreign country, are subtracted in the National Income Accounts system for calculating Gross Domestic Product. In fact, I was always under the impression that this is the very distinction that separates GDP from Gross National Product. If this is the case, the value of outsourced goods and services is in fact not included in GDP, and therefore not included in most measures of productivity. Do you have any proper citatations that support your assertion? I can dig up any number of definitions of the National Income Accounts Identity, although I’m not sure how many of them would explicity state what you’re looking for.

I’m also about 50% certain that typical definitions of “productivity” are measured in production per dollar of labor cost, rather than production per hour of labor. This would imply that a South Korean worker that can produce $100 worth of goods in 2 hours at $3/hour is more productive than an American worker who can produce $100 worth of goods in 1 hour at $15/hour. It would also imply that increased production due to increased hours worked would not be a cause of increased productivity. In fact, if greater hours results in overtime pay, and the marginal production from working overtime is less than 1.5X their normal production (highly doubtful) then they’re actually less marginally productive than they would be if they worked 40 hours per week. I’m not entirely sure this is how productivity is typically measured as you see it reported in the press, although I am sure that this is a definition of productivity that is often employed (and far more informative to me than production per hour of labor). I’d have to dig around to see if this is the case.

26

To clear up some confusion about productivity, wages, and imports:

  1. Productivity is defined as output per hour of work:

ftp://ftp.bls.gov/pub/news.release/History/prod2.03042004.news

Note that the wage rate of the worker is not a factor in the calculation

  1. Output refers to output produced in the United States:

http://www.bea.gov/bea/newsrel/gdpnewsrelease.htm

In the case of a car with components manufactured overseas, the appropriated way to think about output is “value added”. If GM imports $10,000 worth of parts and assembles a car which then sells for $15,000 then $5,000 worth of output was produced in the U.S.

27

Unquestionably, the standard definition of productivity as shown in your cite is total domestic output divided by total domestic hours. This would imply that if you hold output constant, fire half the labor force and make the rest work twice as long, productivity would be the same.

They do, however, track the same sort of statistic I was talking about, except they call it “unit labor costs.” Here’s what they have to say:

Personally, I find this information more useful. What it tells me is that an employer can get more stuff out of a given dollar of labor, and to my mind that is more important to the bottom line. I assume that this statistic includes all of the costs directly associated with labor, such as benefits.

28
  1. Before it was outsourced, those $10,000 worth of parts used to cost $12,000 when they were american made, and when the car cost $15,000. The car still sells for $15,000 even though the car company is now making it cheaper. The productivity of american workers should be calculated based on 15/15ths before outsourcing, and now it would be calculated based on 3/13ths of the cost, although some companies might report it as 3/15ths. The 3/15ths of the car which always was and still is the american contribution, in reality hasnt changed at all - no productivity change, yet the numbers show an increase in productivity from the way the total is calculated.
  2. By the way, assembly and “manufacturing” are 2 different things as far as our national security is concerned. An America which doesnt “make” anything, a nation who only assembles what “others” actually make, is still a nation which in reality produces nothing.
29

Are you suggesting that the US has dropped in its rankings not because other countries have improved their healthcare systems, but because healthcare in the US has gotten worse? Do you really think the infant mortality rate has gone up over the last 30 years? Do you really think people are living shorter lives now than in 1960? If not, what’s the point of your post?

Canada, Australia, Brazil, India, Switzerland, the Scandanavian nations, etc. Sorry, but your theory doesn’t pan out.

Can I see a cite for this? I strongly suspect your figures and assertions are coming directly from your backside.

And I’ll need a cite for this, too.

This one is especially egregious, though. I don’t know what bleached-white suburb you live in, but around here, there are factories and mills, and those factories and mills are pouring out smoke, and I don’t think that’s from all the time the workers have to sit around and take smoke breaks. If you honestly believe that the US doesn’t “manufacture” anything, I’d suggest that you leave the Starbucks and go to Pittsburgh or Chicago or Houston or any other big city.

30

No, according to the links provided, it would be calculated based on the 3/5ths of the value of the care produced by the American workers. Meanwhile, those workers are producing less ($5000 instead of $15000) and working less (assuming there are less of them). Both of which indicates that productivity for your hypothetical factory would be measured down not up.

The data provided does not support your contention that outsourced productivity is simply attributed to local workers and touted as an increase in productivity. Can you provide some evidence that your contentions are not merely made up?

Right. But even if it were “many, many, many, many, many”, it would not a national trend make. It may simply be that your perception of a national tragedy (visa vi job loss) is colored by sensational news rather than hard data.

31

I’m not sure I see the point of your objection. Are you saying that the economies of any of those countries were comparible to America’s during or just before WWI and WWII?

All I suggested was that as a result of America being in a unique position in the world during the several decades following those 2 wars, we were in a position to dominate the world economy. As the economies of the rest of the world’s nations have grown, this level of dominance has shrunk. I’m simply suggesting that we have to compete on a far more level playing field now than we did. If that is true, then perhaps some of the angst we feel when comparing our live to our fathers is simply an inevitable trend towards a leveling of the world economy.

32

Sorry for being unclear.

I was responding to your statement that the US was “the only large industrial nation not severly bombed during WWII or heavily depleted from WWI.” So, yes, each of those countries was comparable to America during or just after WWI and WWII insofar as they were “large industrial nation[s] not severly bombed during WWII or heavily depleted from WWI.”

Is this true? MY understanding is that prior to WWII, the American economy was not considered one of the world’s best. Remember, WWII was immediately preceded by the Great Depression.

If the culprit for European nation’s lag-time was the bombing and civilian depletion in WWI and WWII, then why would it take them 60-odd years to catch up? Didn’t they rebuild their infrastructure much faster than that? Given the propensity for breeding of the post-WWII generation, why would it take so long to gain back the civilian population?

I agree that we have to play on a more level playing field, but I think that’s largely the result of dramatic changes in foreign policy. Governments have opened borders and lowered tariffs across the board, making it easier to ship jobs overseas or import cheaper goods. Increasing foriegn trade means 1) that goods are cheaper here; 2) that our money is helping to prop up their economy, thus decreasing the relative gaps in our economies; and 3) that some of the goods that were formerly being bought from US manufacturers are now being bought abroad (but on the other hand, they’re now buying more of our goods, which creates more jobs in those industries).

My personal opinion is that what we’re feeling is just that – angst. We are better off than our fathers. It’s just that back then, we were kids so we didn’t have to work for our lifestyles, and now we’ve grown so accustomed to having much cooler stuff – color televisions, home computers, DVD players, movies with THX or DDS, cell phones, CD players in our cars, HEPA air filters, bottled water, Rogaine – that it seems like we’re barely scraping by.

[Note: Obviously, not everybody is better off than their father. But I think nationwide, people have a much better lifestyle. As always, YMMV.]

33

Technically, your analysis is true. However, there are a few things worth considering. First, in the example you have cited, the car company would be strongly tempted to lower the price of the car, by as much as $2,000, to sell more and gain at the the expense of their competitors. This means that American value added would still be $3,000. Second, the empirical relevance of this example is limited. Imports make up only about ten percent of the economy, most imports come from high-wage countries, many imported goods are finished products, and wage rates are a modest part of the price of most manufactured goods. So the impact of outsourcing on productivity figures is likely to be small.

Where do you draw the line between manufacturing and assembly? What does national security have to do with it? Most workers don’t “make” any physical product (this has been true for decades), yet their work still has value, since people are willing to pay for it.

34

In 1971 only mainframe computers were used by only the largest companies. Government checks still had holes in them so they could be sorted. Small companies still worked with ledgers filled out by hand. The computer I’m using now has more power than any but the most powerful computers (CRAY) back then. In the late 70’s, I saw the first Apple computer, but they were hard to get. In about 1982, we bought the first computer for our company, it had a 48K memory and we thought it could accomplish miracles. I can’t believe that anyone who is 33 years old, thinks that the Internet is the only whiz-bang tech development in their lifetime. And there are others that have repeated this same nonsense. I suggest that some of the posters on this thread need to read Future Shock by Alvin Toffler which I believe was published in 1971 and/or some of his more recent books.

35

Perhaps I was being overly brief. I don’t think the size of the economies of any of those countries compared to America’s even before WWI. I agree that they were industrialized. And that they were not bombed. However, I’m not sure they were in any position to become dominant due to their size. Perhaps I should have said something like the only one of the largest handfuls of economies to have been spared the bombings.

I think you are wrong. The Great Depression was a world wid phenomena in many repsects. I could be wrong, as well, but I think that the American economy was considered “world class” (whatever that means exactly) for most of the 1900s.

I’m not sure it did. We were talking about a change in the American lifestyle begining in the early 70s. And I suggested that it may have in fact begun earlier. So we are talking about something more like 20 or 30 years. also, I am not suggesting that the populations did not increase. Nor that their infrastructures did not improve during that time. Merely that the necessity of rebuilding said infrastructure provided the American economy with an opportunity to become globally dominant.

Right. But those changes in foreign policy are an acknowledgement of the fact that the world economy will not be dominated so heavily by America forever. That is, even if we were to retain or reinstate every protectionist law ever passed, we would not halt the growth of the rest of the world’s economies. We would simply remove ourselves from participating in them.

I agree completely with this.

I should add that I am not proposing that WWI and WWII are the only or a complete explanation for the massive difference between the American economy and the rest of the world. I was only postulating that this difference might have allowed a couple generations to enjoy less competition than we have today.

36

Thanks for the clarification, pervert. I’m not sure I totally agree with your point, but I do think I understand it better now.

After a quick Google search, it looks like you’re right about this. Here is a draft of a paper that lists the relative GDP levels of China, India, USA, UK, Russia, France, Germany, Italy, Japan, and Brazil from 1870 through 2000. According to this paper, the US had the 3rd largest GDP in 1870 (China had the highest, followed by India), and the largest GDP (by far) from 1913 through 2000. [See Table 3]

Interestingly, though, the relative GDP levels of the countries other than the US has not been slowly decreasing the gap with the US since WWII, as (I believe) you suggested might have been happening. Instead, the US has largely been increasing its lead every year.

If someone has some figures that dispute this, I’d be very interested to see them.

37

Is making television commercials productive? People make money making and broadcasting the commercials.

How many person hours are wasted watching the commercials? Watching two hours of commercial TV a day is 30 minutes of comercials. 50,000,000 Americans watching that is 25,000,000 hours of PRODUCTIVITY PER DAY.

Dal Timgar

38

Thanks you very much for that paper. It was quite interesting. Your right it does seem to disprove my point that the world economies closed the gap with America. Table 3 is not definitive, however. If you look at Germany and Japan in particular, they went from 14 to 23 and 10 to 24 percent GDP compared to America in the period from 1950 to 1973. However, the UK went from 23 to 19 during the same period. I guess I had internalized the German and Japanese stories and drawn conclusions about the whole world.

Specifically, I was thinking of the example of the auto industry. I was thinking of the characterization that it became fat and lazy as the dominant world producer. Around about 1970ish that industry was taught the lesson that complacency is never justified. I suppose I extrapolated that to world events a little to broadly.

Thanks for the edification. :slight_smile:

39

I think the Real GDP per Capita (also shown in the paper) is a better measure to focus on since it normalizes figures based on the countries population. Interesting how high China and India are relative to everyone else in 1992-2000. I wonder if the delta between these countries and the USA has been maintained or increased for 2001-2003?

Here’s a good link on Real GDP Per Capita